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January 23 - 29, 2009 The Independent Weekly 10 www.independentweekly.com.au international The world hangs on W Hamish MCrae hat happens to the US economy matters almost as much to the rest of the world as it does to the US itself. If the past few months have reminded us of anything it is that the fate of the world economy is inextricably linked to that of the US. It was the Wall Street Crash of 1929 that is believed to be the origin of the phrase: “When America sneezes Europe catches the cold”. Now the present banking crash has shown that Asia and Africa are also catching a cold, maybe a serious one. But if Barack Obama carries the double burden of a faltering economy and huge expectations of the ability of the authorities to fix it, he is also a president with time on his side in one crucial regard. It is that during the next four years there will be a recovery in the US and world economy.Weseem unable to escape from the phenomenon of the global cycle, even if we can manage to mitigate its most serious effects. But it would be right outside all post-war experience were the recovery not to be secure by 2012 – indeed it would be at the limits of the 1930s experience too. So the prime issue is not, as is so often portrayed, whether the new administration can rescue the US economy. Of course it can. It is whether it can help redirect the country towards most sustainable growth. The US economy, like the rest of us, has a cyclical problem but it also has a structural one. The challenge is to tackle both, but with the greater emphasis on the long term. The important thing to realise The Proteus Leadership Centres proudly presents: about the US economy is that it is inherently extremely competitive and flexible but it consumes too high a proportion of its income. Forget all the self-flagellation about its competitiveness: that the US can’t make cars the rest of the world wants and so on. Of course in any such criticism there is always a measure of truth but the strengths vastly outweigh the weaknesses. The country utterly domi- CONFERENCE 2009 HILTON - ADELAIDE h May nates world trade in intellectual and cultural exports. It can create new companies and new industries like no other place on the planet. You can see that in the detail: for example the genius that made “to Google” a new transitive verb. And you can see it in the grand economic statistics: the highest productiv- ity on most measures of any nation. The US has been remark- KEYNOTE SPEAKERS INCLUDE: JANINE ALLIS Founder - Boost Juice ROB REDENBACH Motivational Speaker MARGOT SP Founder - J Possum Furniture PALDING Jimmy Register today into Australia’s premier leadership conference. For further information visit our website at: www.proteuscentre.com or call (08) 8110 7300 EVENT SPONSORS ably generous in exporting its know-how. It would not have been possible for China to sustain its economic take-off had US companies not set up production facilities there, transferring their knowledge as well as providing their market for the goods. You could say that that generosity has been the prime reason why 400 million or so Chinese people havemoved from poverty to a middle-class lifestyle during the past dozen or so years. There is no reason why America’s restless inventive genius should not continue to pump out great new ideas and its corporations not exploit those, turning them into commercial successes. That will happen whoever is in the White House. Mr Obama has a The country utterly dominates world trade in intellectual and cultural exports. It can create new companies and new industries like no other place on the planet different task. If the productive side of the US is in pretty good shape, the consumption side has caused huge problems. Total debts in the US is 350 per cent of GDP, higher even than at the height of the 1929 boom or the end of World War II. You could say that the country has put itself into hock to China in order to buy cheap Chinese tat; or that it has wrecked its banks in order to enable its people to borrow for things they didn’t need and couldn’t afford. Of course America is not alone here. Other countries, including our own, have made similar mistakes. But the scale of the US error, you might almost say its self-indulgence, has been greater. It cannot be right for the world’s richest nation to be its most indebtedt. Its people do realise that something has to change and in just the past few weeks consumption has fallen off a cliff.That has been driven partly by fear and sometimes reality of rising unemployment, a particularly cruel effect in a country where health insurance is generally tied to people’s jobs. It has also been driven by the difficulty in obtaining credit, for the US banking system has been gummed up in pretty much the same way as ours. That obviously makes matters worse: the more people lose their jobs the more consumption slows and the more companies have to lay off yet more workers. So there is in the US the immedi- ate need to get some sort of stimulus under way.That is the first task of the new administration. But there is a longer term task, the need to rebuild a society that relies less on credit, that consumes a smaller proportion of its huge income, one that sets more aside for the future, one that puts a smaller imprint on the resources of the planet. You could almost say that there needs to be a new moral imperative, one that directs resources to the things that really matter to most Americans: a better and more secure life, not just the acquisition of more stuff. Barack Obama knows all this. But I think we all know this. My American friends and indeed family cousins know this. One effect of the harsher economic climate is to make people consider their priorities, and the country does now have leadership in turn with those priorities. And what is good for America is good for the world, for to turn the “sneeze” analogy on its head, when the US economy is healthy the rest of us are likely to be healthy too. – The Independent Try our online version Sign up to Indaily, our daily email news service, and get a free trial of the digital version of The Independent Weekly delivered to your inbox each Friday morning. www.indaily.com.au Indaily is a free email news service giving you a convenient local update each work day at 4pm. 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